Most groups arriving in Montenegro assume transfer pricing is a large-company problem. The statute disagrees on both counts. The related party threshold is 25%, not a majority. The documentation obligation applies to every taxpayer with related-party transactions, differing only in whether the file is submitted or merely held. And a branch has to document its dealings with its own head office, which surprises groups that did not think they had intra-group transactions at all.
This page sets out the regime as it appears in the Zakon o porezu na dobit pravnih lica. It states no tax rates and is not tax advice; it describes the rules that decide what your file has to prove.
A note on currency before anything else. The consolidated text we were able to obtain runs to Sl. list CG 028/23 of 10 March 2023. A later amending act, Sl. list CG 088/24 of 13 September 2024, exists and we have not read it. The structural rules below are unlikely to have been rewritten by it, but any threshold, deadline or figure should be confirmed against the gazette before it is relied on. That is the honest position, and we would rather state it than imply a currency we cannot evidence.
Related party begins at 25%, and control is wider than shareholding
Article 38(1) defines the transfer price as the price arising in connection with transactions of assets or the creation of obligations among related parties.
Article 38(2) then gives related-party status to a legal or natural person that participates, directly or indirectly, in the management, control or capital of the taxpayer — and to a legal person in which the same natural or legal persons participate in management, control or capital, which is how sister companies are caught.
Article 38(3) puts numbers on it. A person participates in management, control or capital if it either:
- holds, directly or indirectly, at least 25% of the taxpayer's shares or ownership stakes; or
- has the actual ability to control the taxpayer's business decisions.
Article 38(4) then defines that actual ability, and it does not require any shareholding at all. It exists where the person holds or controls, directly or indirectly, at least 25% of the voting rights in the taxpayer's management organs; has a right to at least 25% of the taxpayer's profit; or is a family member of the taxpayer, or a related party of a family member.
Article 38(5) defines family broadly: blood relatives in the direct line and in the collateral line to the fourth degree, the spouse or extramarital partner, a same-sex life partner, and in-laws to the second degree — regardless of whether the marriage has ended — together with adoptees and their descendants.
Article 38(6) adds non-resident legal persons falling under Article 29(5) and (6).
| Route to related-party status | Threshold | Provision |
|---|---|---|
| Shareholding, direct or indirect | At least 25% of shares or stakes | Art. 38(3) |
| Voting rights in management organs | At least 25% | Art. 38(4)(1) |
| Participation in profit | At least 25% | Art. 38(4)(2) |
| Family connection | Direct line, collateral to the fourth degree, spouse, extramarital partner, same-sex life partner, in-laws to second degree | Art. 38(4)(3), Art. 38(5) |
| Common participation by the same persons | No percentage stated for the sister-company limb | Art. 38(2)(2) |
The practical consequence is that a minority investor with a 25% stake, a founder's brother-in-law, and a fund with board control but no equity can each be a related party. Groups that scope transfer pricing by consolidation perimeter will scope it too narrowly.
The arm's length obligation, and who does the adjusting
Article 38a(1) requires a taxpayer with one or more related-party transactions to determine its taxable profit in accordance with the arm's length principle. Article 38a(2) defines compliance: the base is at arm's length if the conditions of the related-party transactions do not differ from the conditions that would apply between unrelated persons in comparable transactions carried out in comparable circumstances.
Article 38a(3) is the operative one, and it cuts both ways: where the conditions are not at arm's length, the taxpayer or the competent tax authority must adjust the taxable base. The adjustment is not something that only happens on audit.
Article 38a(4) specifies what goes into the base: the positive difference between income at the arm's length price and income at the transfer price, or the positive difference between expense at the transfer price and expense at the arm's length price. Only the difference that increases the base is included — a one-way adjustment, which is why a group cannot rely on offsetting mispricing in the other direction.
Six methods, and a separate rule for intra-group interest
Article 38b(1) lists the methods for establishing the arm's length price: the comparable uncontrolled price method; the cost plus method (cost increased by the usual profit, that is, a gross margin); the resale price method; the transactional net margin method; the profit split method; any other method capable of establishing the arm's length price where none of the first five can; and a combination of them where necessary.
Article 38(7) requires the Ministry to prescribe the closer manner of determining the price in accordance with the guidelines of the OECD and other international organisations — so the interpretive material is the familiar one, applied through a domestic instrument.
Intra-group financing gets its own route. Article 38b(2) requires the Ministry to prescribe the arm's length interest rates applicable to loans, credits and other financial instruments between related parties, by 31 December of the current year for the following year. Article 38b(3) then gives the taxpayer an election: instead of the prescribed rates, it may apply the general arm's length methods in Article 38b(1). Two routes, and the choice is the taxpayer's.
The documentation rule that catches everyone
This is where the regime reaches beyond large groups, and the distinctions are precise.
Article 38c(1): a large taxpayer, classified under the regulation setting the criteria for large taxpayers, that carries out related-party transactions must submit transfer pricing documentation together with its tax return, sufficient to establish whether the conditions of those transactions are at arm's length.
Article 38c(2): a taxpayer that is not a large taxpayer must possess that documentation at the time of filing and must submit it on request within 45 days of receiving the request.
Article 38c(3): that taxpayer may hold the documentation in short form where related-party transactions do not exceed €75,000 in the year for which the return is filed.
🔴 Article 38c(4): transactions between a permanent establishment under Article 4 and the non-resident head office of that establishment are subject to transfer pricing documentation. A foreign company operating in Montenegro through a branch is transacting with itself in commercial terms, and with a related party in tax terms.
Article 38c(5) leaves the closer content of the documentation to the Ministry.
| Taxpayer | Documentation obligation | Trigger |
|---|---|---|
| Large taxpayer with related-party transactions | Submit with the tax return | Art. 38c(1) |
| Other taxpayer | Possess at filing, submit within 45 days of request | Art. 38c(2) |
| Other taxpayer under EUR 75,000 of related-party transactions | May hold short-form documentation | Art. 38c(3) |
| Permanent establishment and its non-resident head office | Documentation required for those dealings | Art. 38c(4) |
Tax consolidation is available, and it locks you in for five years
Sitting alongside transfer pricing in the same chapter is the group regime, and its conditions are strict.
Article 35(1): a parent and subsidiaries form a group of related enterprises for tax consolidation where the parent has direct or indirect control of at least 75% of the subsidiary's shares or stakes. Article 35(2): all of them must be residents of Montenegro — this is a domestic regime, not a cross-border one. Article 35(3): the parent applies by 31 December of the current tax period, and under Article 35(4) the authority decides within 30 days.
Article 36 sets the mechanics: each member files its own return, the parent files a consolidated return, losses of members are set off against the profits of other members, and the tax computed on the consolidated return is owed by the members individually in proportion to the taxable profit on their own returns.
Article 37(1): once approved, consolidation applies for at least five years. Article 37(2): if the Article 35 conditions change before that, or one or more members opts for individual taxation, each member must repay the proportionate difference of the relief it used.
What this page does not do
It states no rates, no penalty amounts and no filing dates beyond those in the articles cited, and it is not advice on your position. The residence and controlled-foreign-company analysis for a Turkish group is set out separately in our tax residence and double taxation guide, and whether a treaty is available at all is answered in our treaty network guide. The corporate side of who controls whom — which matters because the company law thresholds are different from the tax ones — is in our holding structure guide.
That difference is worth a sentence of its own. Company law treats significant participation as more than 20% of voting rights and majority participation as more than 50%. Tax law sets related-party status at 25% of shares, voting rights or profit participation. A group can be inside one definition and outside the other, and the two questions have to be run separately.
Read on 26 August 2026 in the consolidated text described above, with the currency caveat stated at the top.
Before your next intra-group invoice
Four questions. Have you scoped related parties using the 25% test in all three of its forms — shares, voting rights and profit — rather than by consolidation perimeter? Does the scope include family connections reaching to the fourth degree of collateral kinship? If you operate through a branch, is anyone documenting the dealings between the branch and head office that Article 38c(4) requires? And do your related-party transactions cross €75,000, which is the line between short-form and full documentation for a non-large taxpayer?
Send us the group chart, the intra-group agreements and the intercompany balances, and we will tell you who is a related party under Article 38, what documentation Article 38c requires of you and when it has to exist. The quantitative work belongs with your tax adviser and we will say so. This work sits in our international tax practice.
